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BOJ Resolute on 2% Inflation
World Economy

BOJ Resolute on 2% Inflation

Bank of Japan Governor Haruhiko Kuroda said on Friday the central bank will act “decisively” to achieve its 2% inflation target, stressing that it still has “ample” policy options available if it were to expand stimulus again.

Kuroda defended the BOJ’s decision last month to hold off on monetary easing, saying that more time was needed to scrutinize the effects of past easing measures on the economy, Reuters reported.

But he said the BOJ would not necessarily stand pat until the policy effects on the economy are confirmed, and will guide policy in a “timely, forward-looking manner.”

“Risks to the economy are tilted to the downside,” Kuroda said in a speech at a seminar, pointing to uncertainty over the global economy, volatile financial markets and their effect on business sentiment.

“There is no doubt that the BOJ has ample space for additional easing,” such as expanding asset purchases or pushing interest rates deeper into negative territory, he said.

“We will carefully consider how to make the best use of the (current) policy scheme to achieve 2% inflation, and will act decisively as we move on.”

The BOJ stunned markets in January by adding negative interest rate to its massive asset-buying program in a fresh attempt to accelerate inflation, now ground to a halt, to its 2% target.

But the move has failed to arrest an unwelcome rise in the yen and stock price falls, keeping the BOJ under pressure to deploy additional stimulus.

While the BOJ defied market expectations of action and stood pat in April, a prominent academic close to Kuroda told Reuters the central bank could act in June or July given lingering external headwinds to growth.

 

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